Finding Text
Finding 2024-001 Interproject Payable – Amounts Owed to Other HUD Project Type of finding:
Significant deficiency in internal control. Condition and context:
During our audit we noted that the project has recorded a payable due to another HUD-assisted project in the amount of $3,072, and there is no documented HUD authorization supporting this obligation. Criteria:
Per 2 CFR Part 200 (Uniform Guidance), §§200.302 and 200.403, federal program funds must be used only for allowable costs and in direct support of the objectives of the program. HUD requirements also prohibit the commingling of funds between projects unless explicitly authorized. Interproject payables or advances without proper documentation or timely settlement may constitute an unallowable use of program resources. Cause:
Management permitted the use of funds from another HUD-assisted project to support operations of this project without obtaining HUD approval or establishing proper repayment terms. This occurred due to inadequate oversight of cash management and interproject transactions. Effect:
Maintaining an outstanding payable to another HUD project: • Indicates potential misuse of federal funds.
• Increases the risk of noncompliance with HUD requirements and Uniform Guidance.
• May impair the project’s ability to demonstrate financial independence and program accountability.
• Exposes the project to possible HUD sanctions, questioned costs, or repayment obligations. Questioned costs:
Known questioned costs are $3,072. Recommendation:
We recommend that project management: • Repay the outstanding payable to the related HUD project as soon as feasible.
• Cease the practice of interproject borrowing unless HUD has provided explicit authorization.
• Implement stronger internal controls over cash management and interproject transactions.
• Document and monitor all project-level obligations to ensure compliance with HUD regulations. Views of Responsible Officials:
Management agrees with this finding and the payment will be corrected. Management will review internal controls and implement a review process to only pay expenses already incurred to avoid future payments.